20110317 clean up 54
Japanese Self Defence Force soldiers comb through the rubble of a building. - 

JEREMY HOBSON: And that's where we'll start with our market analyst this morning. Diane Swonk is off, so we're pleased to be joined instead by David Kelly, chief market strategist with JPMorgan Funds. He's with us live from Boston. Good morning.

DAVID KELLY: Good morning.

HOBSON: So David, as I just said, the cost to the things we consumers buy are going up. The number of people checking in at the unemployment office going down -- seems like OK news for our recovery. Is that your take?

KELLY: I think that's right. I mean nobody likes paying more for food and energy. But I think the big threat to the American economy in the last year has been deflation and the numbers this morning suggest the inflation rate is basically stabilizing. Not that high a level but it's going up. We also got some good numbers in manufacturing today. So with manufacturing output up unemployment claims down, inflation is stable, the U.S. economy does seem to be in a recovery mode.

CHIOTAKIS: All right but U.S. economy obviously is not in a vacuum, and we've had some significant drops in stocks here in the U.S. over the last couple of days as a result of what's going on Japan. How much worry do you have about the situation in Japan derailing our recovery here in the U.S.

KELLY: Well, not that much, I mean obviously it's a terrible human tragedy and I think for markets the biggest problem is uncertainty and I can't think of more uncertainty than the nuclear situation in Japan. But provided that stabilizes, the reality is the Japanese economy -- it's going to get hurt in the first half of the year, but it should do better the second half of the year as they try and rebuild. And our exports to Japan are a very small part of our economy, so I think we should be able to weather this. I think the main problem is really one for Japan itself.

HOBSON: David Kelly, chief market strategist with JPMorgan Funds, thanks so much for your time.

KELLY: You're very welcome.